AmTrust has been witnessing rising earnings estimates on the back of good tidings. Notably, this well-known property and casualty insurer delivered positive earnings surprises all of the last four quarters with an average beat of 21.82%. The long-term expected earnings growth rate for this stock is 15.0%.

Last month, AmTrust Financial entered an agreement to acquire Comp Options Insurance Company, Inc. (OptaComp) a company affiliated to the Blue Cross Blue Shield of Florida. With the closure of this deal (expected by the end of 2014), AmTrust expects to capitalize on the synergies that include OptaComp’s market of low-hazard workers' compensation insurance risks to gain market share.

Additionally, with a strong financial position to support, we expect AmTrust Financial to come up with more such endeavors that would enhance inorganic growth and help generate higher returns in the long run. Furthermore, AmTrust Financial’s robust balance sheet as well as underwriting and operating performance prompted credit rating agency A.M. Best to affirm the Financial Strength Rating (:FSR) of “A” to the holding company and Issuer Credit Rating (:ICR) of “a” to the P&C subsidiaries with a stable outlook. The “bbb” ICR and debt ratings of AmTrust Financial were affirmed as well.

AmTrust Financial’s strong finances also led it to declare a quarterly cash dividend of 20 cents per share in May 2014, yielding 1.94%

The Zacks Consensus Estimate for 2014 increased 8.1% to $4.56 per share as most of the estimates were revised higher over the last 60 days. For 2015, estimates moved upward over the same time frame, lifting the Zacks Consensus Estimate by 2.1% to $4.95 per share.

Other Stocks to Consider

Other stocks that look attractive at current levels in the property and casualty space are Arch Capital Group Ltd. (ACGL-Free Report), Alleghany Corp. (Y-Free Report) and Endurance Specialty Holdings Ltd. (ENH-Free Report). All these stocks have the same Zacks Rank as AmTrust.

Diamond Foods to Grow on Turnaround Strategy

On Jul 3, 2014, we issued an updated research report on Diamond Foods, Inc. (DMND-Free Report).

The company recently posted its third-quarter fiscal 2014 adjusted earnings of 11 cents per share. Though earnings missed the Zacks Consensus Estimate of 16 cents, it registered 37.5% year-over-year growth.

Moreover, the company’s top line climbed 3.2% year over year to $190.9 million, marginally surpassing the Zacks Consensus Estimate of $189.0 million. Robust performance at the Snacks division was offset by increased walnut prices that weighed on the Nuts segment’s performance.

Diamond Foods’ vertically integrated business model allows the company to quickly react to the market trends and exploit new opportunities. Moreover, the company’s nut roasting facilities and patented glazing technologies provide a self-stable glazed nut for the mass market.

Also, the company is benefiting from its sustained cost-curtailment endeavors. We believe that the company’s turnaround strategies such as improving price realization, lowering underperforming SKUs and reducing dependency on discount have placed it on the path to success, as evident from improved margins and earnings results for third-quarter fiscal 2014.

Additionally, Diamond Foods is focusing on gaining its lost market share through expansion of the existing product lines and introduction of new products in the United States. Management’s strategic plan is based on providing higher-margin branded products at premium price points.

Further, we expect the company’s future results to exhibit more sustained growth of its brands due to product innovation and differentiation, improved cost structure and revived relationship with walnut suppliers.

However, the company remains susceptible to near- term headwinds such as challenges related to procurement of walnut supplies and mending ties with growers. Furthermore, we remain skeptical about the company’s performance going forward due to its highly leveraged balance sheet.

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